It started with a conversation
Let me tell you about a client I started working with in 2020. She had gone through a life changing event. She needed to replace household income and wanted to do it through rental property. She had been interviewing operators across the country, trying to find someone she felt comfortable working with.
We talked about Chicago, what she wanted to accomplish and how we could get there. I sent her examples of our work and walked her through how I looked at a property. In her August follow up, she told me she appreciated the detail and felt comfortable with my experience. We kept talking, started looking at neighborhoods and put a plan together.
Once we got comfortable with each other, we started looking for a building she could hold for rental income. The plan was to renovate, refinance and keep it. I would handle the local work and keep her informed. She was trusting me with an important part of her future, and I understood that.
She loved the neighborhood
On September 29, 2020, I sent her 2708 W 24th Place. It was a brick three unit in Marshall Square, near Marshall Boulevard. The building needed a lot of work, but I liked the opportunity.
The preliminary rehab budget was $200,000. As we went through our due diligence before the purchase, that number climbed to $250,000. She had fallen in love with the neighborhood, and the numbers still fit her goal. Taking on an extensive renovation from out of state takes a strong person. She understood the work ahead, trusted the team we had put together and moved forward with confidence.
I introduced her to Armitage Street LLC for acquisition and construction financing. The original construction budget was $250,300. I handled the local coordination, architect, construction draws and updates.
Then the neighbor’s building caught fire
On April 30, 2021, we were finishing the rough phase when a fire on a neighboring rear porch spread to our building. The fire started next door. Our team did not cause it. The City posted a stop work order and an off limits notice on our fire damaged door.
At that point, the job changed pretty quickly. We had fire damage to deal with on top of the renovation already underway. We had to secure the building, document the loss, get the architect back out and work through the insurance claim. The client still needed this property finished. My job was to figure out the next steps and get them done.
By May 7, 2021, we had cleared debris, arranged the required board up and coordinated visits with the architect, contractors and adjuster. On June 1, I requested the fire reports for both buildings, including 2704 W 24th Place, where the fire originated. I kept the client updated as we worked through each piece.
Getting the money and the scope right
I went through the insurance estimate and questioned the items that didn’t match what we needed to rebuild. The front porch was one of them. The allowance was $10,000. The contractor said it was compromised and needed replacement, and the quote was $15,000. I sent that assessment and quote back to the adjuster and pushed to get the repair allowance corrected.
Repairs, mitigation and cleanup/board-up brought the combined claim scope to $146,023.79. After the $5,000 deductible, the potential net claim was $141,023.79, including depreciation recoverable after repairs. These are insurance-scope figures, not a statement of the property’s total renovation cost or investment return.
- Repair estimate
- $129,223.00
- Mitigation
- + $12,300.79
- Cleanup and board-up
- + $4,500.00
- Combined claim scope
- $146,023.79
- Deductible
- − $5,000.00
- Potential net claim, including recoverable depreciation
- $141,023.79
As of July 6, 2021, project correspondence reported $119,677.99 funded and $21,345.80 in depreciation recoverable after repairs. The $141,023.79 net figure assumes recoverable depreciation is released. It is not evidence that the full amount had already been paid.
On the day of the fire, Yan Pesotskiy at Armitage Street LLC consulted their insurance contact and helped point us toward filing the claim with our own insurer. Armitage then incorporated the insurance proceeds into the construction draw process so the money could be released for the repairs. These were insurance funds, separate from the loan proceeds.
Armitage worked with us on the revised budget and draw paperwork. First American Title confirmed the insurance deposit in July, and the revised permit was approved on August 2. I coordinated with the lender, title company, insurance adjuster and contractors to keep the recovery moving.
The revised construction budget was $396,324, combining the original $250,300 with approximately $146,024 in fire repairs. We rebuilt the damaged areas and completed the renovation with plans, permits and inspections.
The work included masonry, windows, roof and skylights, front and rear porches, framing, insulation, plumbing, electrical, heating and cooling, kitchens, bathrooms and flooring. There was a lot to put back together. We stayed with it.
A finished building and the move into rentals
We completed the building in 2022, and the client kept it as a rental. I worked with Mark Raff at loanDepot on the refinance process and put together the property history and comparable sales for the appraisal review.
The appraisal came back at $540,000, effective November 11, 2022. The appraiser estimated market rent at $4,800 per month.
I introduced Troy Gripentrog of Redefined Realty & Management to help with leasing and management. We continued working through showings, tenant placement and maintenance. In my March 23, 2023 update, I confirmed a new tenant for unit 2 at $1,300 per month, with possession scheduled for April 14. We eventually turned the building over to Andy Andrade of Shore Properties for ongoing management.
This took longer than the four to six months we originally expected. The fire changed the job, the budget and the timeline. We kept working, and the client ended up with a completed three unit rental property in the neighborhood she loved.
- Appraised value, November 11, 2022
- $540,000
- Appraiser’s estimated monthly market rent
- $4,800
The timeline
| August 2020 | Introductory conversations, project examples and financing discussions. |
|---|---|
| September 29, 2020 | Original acquisition proposal with a preliminary $200,000 rehab budget. View the original proposal |
| Before purchase | Due diligence brings the rehab budget to approximately $250,000. Original construction budget: $250,300. |
| December 22, 2020 | Recorded client purchase. |
| April 30, 2021 | Neighboring fire spreads to the building. City stop work and off limits notices posted on our fire damaged door. View the door and notices |
| May 10, 2021 | Architect proposes a full permit to resolve the stop work order and rebuild the front stair and porch. |
| June 14, 2021 | Revised insurance repair estimate of $129,223.00 issued. View the redacted insurance estimate |
| July 6, 2021 | Project correspondence reported $119,677.99 funded and $21,345.80 in depreciation recoverable after repairs. Combined repair, mitigation and cleanup scope: $146,023.79; potential net claim after the $5,000 deductible: $141,023.79. Insurance funds were deposited into construction escrow and incorporated into the revised draw process. |
| August 2, 2021 | City issues permit 100925286 for interior renovation, fire repairs and the new front entry stair and landings. View the City permit |
| 2022 | Renovation completed and property retained as a rental. |
| September 8, 2022 | Unit 1 lease signed by the owner. View the lease confirmation excerpt |
| October 20, 2022 | Unit 3 lease signing completed. View the lease confirmation excerpt |
| November 11, 2022 | Effective date of the $540,000 appraisal. |
| March 23, 2023 | Unit 2 tenant confirmed, with April 14 possession planned. |
| Ongoing management | Building eventually turned over to Andy Andrade of Shore Properties for ongoing management. |
The people around the project matter
When I think about 24th Place, I think about a client who trusted us during an important change in her life. She chose the neighborhood and committed to the project. We had to keep that trust through a situation none of us had planned for.
Armitage Street LLC financed the acquisition and construction and worked with us on the revised budget and repair draws after the fire. Everyone had a part to play in getting the building finished.
At the end of the day, she hired me to help her get this building finished. The fire made that harder, but the responsibility was still there. I had to keep her informed, work with the people around the project and keep solving the next problem. Armitage did their part, our team did ours, and we got her building completed.